Nick Clegg warns against eurozone gloating

Nick Clegg today warned eurosceptics against gloating over the state of the eurozone as Greece struggled to break the deadlock over assembling a workable government.

Speaking in London the Deputy Prime Minister declared: "We as a country depend massively on the prosperity of the eurozone for our own prosperity, which is why I can never understand people who engage in schadenfreude - handwringing satisfaction that things are going wrong in the euro."

Answering questions during a visit to a school in Islington, he went on: "We have an overwhelming interest - whatever your views are on Brussels and the EU - in seeing a healthy eurozone.

"That's why I very much hope, buffeted by these latest scares and crises in Greece and elsewhere, that the eurozone moves as fast as possible to a sustainable solution because if the eurozone is not growing and the eurozone is not prosperous it will be much more difficult for the United Kingdom economy to gather momentum."

With eurozone ministers gathering in Brussels this afternoon, and politicians in Athens still battling to avoid an election re-run, Mr Clegg commented: "Of course I hope, like everybody hopes, that the immediate crisis in Greece can be resolved one way or another because it's uncertainty that is particularly damaging to economies when things are as fragile as they are across the European Union."

Earlier Business Secretary Vince Cable warned that any failure of the firewalls constructed to prevent Greece's economic problems spreading to other eurozone states could have a 'massive impact' on the UK.

He said: "The problem would affect us if it spread, if you had these contagion effects in Italy and Spain.

"(EU internal market commissioner Michel) Barnier has expressed optimism that those firewalls have now been created and we must hope he's right, because if they're not then of course it has a massive impact on our trade.

"Half of our exports go to the eurozone countries, our banks are quite substantially exposed to those countries."

Labour's shadow chancellor Ed Balls and former EU commissioner Lord Mandelson used a joint article for the Guardian to call for a "new political settlement" in Europe to correct imbalances between different parts of the eurozone.

The two former Cabinet ministers - opponents over UK membership of the euro - wrote: "The single currency needs to survive and succeed, and we are worried that Europe has so far identified only half the solution. "There is a real danger that binding countries into ever larger cuts and tax rises to meet the new structural deficit and debt targets will become self-defeating, economically and politically.

"We need a new strategy that permits a more sustainable approach to debt reduction through growth and long-term fiscal responsibility."

Despite not being a eurozone member, Britain should be "at the centre" of this process, they said: "The reality is that there is no bad outcome for the eurozone that is not a bad outcome for Britain."

In Brussels eurozone ministers
were not expected to make firm decisions as long as the warring Greek
political parties are still talking about forming a government.

But hopes were fading of avoiding a second general election - a poll
which would almost certainly deliver an administration committed to
dismantling the national austerity policy demanded by Brussels in return
for massive bail-outs.

The European Commission insisted the austerity plan remained the best option.

"This is the best thing for Greece for the Greek people and for Europe as a whole" said a spokeswoman. She insisted: "Nothing has changed in our position - we want Greece to stay in the euro,
we think the Greek (austerity) programme is the best course for Greece
and, while we respect the on-going efforts in Greece (to form a
government), we say that Greece must honour its (austerity)
commitments."

She insisted her words did not contradict Commission President
Jose Manuel Barroso, who said in an Italian television interview at the
weekend that if a member of a club does not honour club rules, that
member should leave.

The spokeswoman insisted: "That was a general remark about any club, not about the eurozone. The fact is we must respect Greek democracy - but Greece must respect the other 16 members of the eurozone."

Speculation that Greece outside the eurozone
would get further bail-outs involving all member states prompted a
warning from Downing Street that: "We have been very clear all along
that it is for eurozone countries to support their currency."

German magazine Der Spiegel claimed the German finance ministry
is working on plans for a fresh bail-out to stabilise Greece if it
returns to the drachma.

This would count as general crisis funds, to which all member states traditionally contribute.

The eurozone countries are currently putting in place a European
Stability Mechanism bail-out fund in which Britain plays no part, and
an earlier mechanism involving the UK is being "switched off" as part of
that process, said Prime Minister David Cameron's official spokesman.

Asked whether Britain would back the recapitalisation of the European
Investment Bank (EIB), the spokesman said: "I don't think there is any
proposal on the table at the moment. We will obviously consider any
proposals that are made on their merits.

"We are open-minded about looking at how the EIB can support
infrastructure investment. That's the traditional role of the EIB, so it
is something we will look at." The spokesman said that measures to
boost growth were certain to be discussed at the G8 summit at Camp David
in the USA on Friday, where Mr Cameron will meet new French President
Francois Hollande.